What costs are included in the homeownership calculation?

The calculator includes mortgage principal and interest, property tax, homeowners insurance, and annual maintenance. It does not include equity buildup, home appreciation, closing costs, or opportunity cost of the down payment.

How does the SALT cap affect homeowners?

The SALT (State and Local Tax) deduction lets you deduct property taxes and state income taxes from your federal taxable income. The TCJA capped this at $10,000. The One Big Beautiful Bill Act (OBBBA) raised it to $40,400 for 2026, with 1% annual increases through 2029 before resetting to $10,000 in 2030. Homeowners in high-tax states benefit most while the higher cap is in effect.

What is the mortgage interest deduction limit?

You can deduct interest on up to $750,000 of mortgage debt ($375,000 for married filing separately). For loans originated before December 15, 2017, the limit is $1,000,000.

When does buying become cheaper than renting?

The break-even point depends on home price, rent, mortgage rate, taxes, and local costs. On a pure cash-flow basis, it typically takes 5–7 years. Including equity buildup and appreciation, the break-even often comes sooner.

Does the calculator account for rent increases?

Yes. The calculator assumes 3% annual rent growth, which is roughly the long-term national average. Actual rent growth varies significantly by market.

Why might I not benefit from the mortgage interest deduction?

You only benefit from itemizing if your total itemized deductions (mortgage interest + SALT + charitable giving + other) exceed the standard deduction ($16,100 single / $32,200 married filing jointly in 2026). Many homeowners with smaller mortgages or in low-tax states still take the standard deduction.

How does the mortgage rate affect the buy-vs-rent calculation?

Higher mortgage rates increase your monthly payment and total interest paid, but they also increase the mortgage interest deduction (if you itemize). The net effect is almost always negative — higher rates make owning more expensive even with the larger deduction.

What maintenance costs should I expect as a homeowner?

A common rule of thumb is 1% of the home value per year. For a $400,000 home, that is about $4,000 annually. Older homes or those in harsh climates may cost more. This covers routine maintenance, not major renovations.

Does the calculator include equity buildup or home appreciation?

No. This is a pure cash-flow comparison showing what you spend each year. Equity buildup and home appreciation generally favor owning, especially over longer time horizons. Think of this calculator as the "worst case" for ownership — reality is usually better.

How does my state affect the homeownership calculation?

Your state affects both property tax rates and state income tax rates, which determine your total SALT deduction. High-tax states like New Jersey, Illinois, and Connecticut have property tax rates above 2%, making the SALT cap a bigger factor. States with no income tax (Texas, Florida) have lower total SALT but may have higher property taxes.

What costs are included in the homeownership calculation?

The calculator includes mortgage principal and interest, property tax, homeowners insurance, and annual maintenance. It does not include equity buildup, home appreciation, closing costs, or opportunity cost of the down payment.

How does the SALT cap affect homeowners?

The SALT (State and Local Tax) deduction lets you deduct property taxes and state income taxes from your federal taxable income. The TCJA capped this at $10,000. The One Big Beautiful Bill Act (OBBBA) raised it to $40,400 for 2026, with 1% annual increases through 2029 before resetting to $10,000 in 2030. Homeowners in high-tax states benefit most while the higher cap is in effect.

What is the mortgage interest deduction limit?

You can deduct interest on up to $750,000 of mortgage debt ($375,000 for married filing separately). For loans originated before December 15, 2017, the limit is $1,000,000.

When does buying become cheaper than renting?

The break-even point depends on home price, rent, mortgage rate, taxes, and local costs. On a pure cash-flow basis, it typically takes 5–7 years. Including equity buildup and appreciation, the break-even often comes sooner.

Does the calculator account for rent increases?

Yes. The calculator assumes 3% annual rent growth, which is roughly the long-term national average. Actual rent growth varies significantly by market.

Why might I not benefit from the mortgage interest deduction?

You only benefit from itemizing if your total itemized deductions (mortgage interest + SALT + charitable giving + other) exceed the standard deduction ($16,100 single / $32,200 married filing jointly in 2026). Many homeowners with smaller mortgages or in low-tax states still take the standard deduction.

How does the mortgage rate affect the buy-vs-rent calculation?

Higher mortgage rates increase your monthly payment and total interest paid, but they also increase the mortgage interest deduction (if you itemize). The net effect is almost always negative — higher rates make owning more expensive even with the larger deduction.

What maintenance costs should I expect as a homeowner?

A common rule of thumb is 1% of the home value per year. For a $400,000 home, that is about $4,000 annually. Older homes or those in harsh climates may cost more. This covers routine maintenance, not major renovations.

Does the calculator include equity buildup or home appreciation?

No. This is a pure cash-flow comparison showing what you spend each year. Equity buildup and home appreciation generally favor owning, especially over longer time horizons. Think of this calculator as the "worst case" for ownership — reality is usually better.

How does my state affect the homeownership calculation?

Your state affects both property tax rates and state income tax rates, which determine your total SALT deduction. High-tax states like New Jersey, Illinois, and Connecticut have property tax rates above 2%, making the SALT cap a bigger factor. States with no income tax (Texas, Florida) have lower total SALT but may have higher property taxes.

The Real Cost of Homeownership: Buy vs. Rent After Taxes

U.S. median home prices are roughly in the $400,000–$430,000 range. After factoring in a 6.5% mortgage, property tax, insurance, and maintenance, the true first-year cost of owning is often around $40,000+ — more than double the principal payment alone. But the mortgage interest deduction and the SALT cap determine how much of that the tax code gives back.

Jon Ragsdale· Chief Investment & Policy Intelligence Officer

Published March 29, 2026

Reviewed by David Duley for factual accuracy, source quality, and clarity.

A home payment is only part of the true cost of owning. Taxes, insurance, maintenance, and financing rules all shape what a house really costs your household each year. This page helps make that fuller number visible.

It is also a policy-risk page because housing costs are heavily influenced by public rules: mortgage deductions, SALT caps, property tax burdens, and insurance regulation all change the real economics of ownership.

Homeownership costs more than the mortgage payment. Property tax, insurance, and maintenance add up — but tax deductions can offset part of the cost. The SALT cap and mortgage interest deduction are the two policy levers that change the math. Enter your numbers to see which option wins.

How PRIA Approached This

This calculator was written by Jon Ragsdale and reviewed by David Duley. PRIA treats tools like this as household policy-risk explainers, not generic widgets. We separate current law from proposals when relevant, translate public rules into plain English, and present the output as an educational estimate rather than personalized advice.

Related Analysis

Tax Bracket Changes 2026

See the wider PRIA briefing connected to this calculator.

Cost Of Living 2026

See the wider PRIA briefing connected to this calculator.

Related Calculators

SALT Deduction Calculator

The SALT cap just jumped from $10,000 to $40,400 — worth thousands for high-tax-state homeowners

Frequently Asked Questions

What costs are included in the homeownership calculation?: The calculator includes mortgage principal and interest, property tax, homeowners insurance, and annual maintenance. It does not include equity buildup, home appreciation, closing costs, or opportunity cost of the down payment.
How does the SALT cap affect homeowners?: The SALT (State and Local Tax) deduction lets you deduct property taxes and state income taxes from your federal taxable income. The TCJA capped this at $10,000. The One Big Beautiful Bill Act (OBBBA) raised it to $40,400 for 2026, with 1% annual increases through 2029 before resetting to $10,000 in 2030. Homeowners in high-tax states benefit most while the higher cap is in effect.
What is the mortgage interest deduction limit?: You can deduct interest on up to $750,000 of mortgage debt ($375,000 for married filing separately). For loans originated before December 15, 2017, the limit is $1,000,000.
When does buying become cheaper than renting?: The break-even point depends on home price, rent, mortgage rate, taxes, and local costs. On a pure cash-flow basis, it typically takes 5–7 years. Including equity buildup and appreciation, the break-even often comes sooner.
Does the calculator account for rent increases?: Yes. The calculator assumes 3% annual rent growth, which is roughly the long-term national average. Actual rent growth varies significantly by market.
Why might I not benefit from the mortgage interest deduction?: You only benefit from itemizing if your total itemized deductions (mortgage interest + SALT + charitable giving + other) exceed the standard deduction ($16,100 single / $32,200 married filing jointly in 2026). Many homeowners with smaller mortgages or in low-tax states still take the standard deduction.
How does the mortgage rate affect the buy-vs-rent calculation?: Higher mortgage rates increase your monthly payment and total interest paid, but they also increase the mortgage interest deduction (if you itemize). The net effect is almost always negative — higher rates make owning more expensive even with the larger deduction.
What maintenance costs should I expect as a homeowner?: A common rule of thumb is 1% of the home value per year. For a $400,000 home, that is about $4,000 annually. Older homes or those in harsh climates may cost more. This covers routine maintenance, not major renovations.
Does the calculator include equity buildup or home appreciation?: No. This is a pure cash-flow comparison showing what you spend each year. Equity buildup and home appreciation generally favor owning, especially over longer time horizons. Think of this calculator as the "worst case" for ownership — reality is usually better.
How does my state affect the homeownership calculation?: Your state affects both property tax rates and state income tax rates, which determine your total SALT deduction. High-tax states like New Jersey, Illinois, and Connecticut have property tax rates above 2%, making the SALT cap a bigger factor. States with no income tax (Texas, Florida) have lower total SALT but may have higher property taxes.

SALT cap changes and mortgage rates shift the buy-vs-rent math. See exactly how policy affects your homeownership decision.

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Homeownership Cost Calculator: The Short Answer

The true cost of owning a home is much higher than principal and interest alone. Property tax, insurance, maintenance, and tax-policy rules often determine whether a home feels affordable after closing, especially in high-tax or high-insurance-cost areas.

The True Cost of Homeownership

A mortgage payment is only the beginning. Property tax, homeowners insurance, and maintenance routinely add 30–50% on top of the principal-and-interest payment. In high-tax states like New Jersey or Illinois, property tax alone can exceed $10,000 per year on a median-priced home.

The rent-vs-buy comparison often ignores these costs — or ignores the tax benefits that partially offset them. Both matter.

Why This Is A Policy-Risk Question

Housing is one of the clearest places where policy shows up as cash flow. A higher SALT cap can improve the after-tax cost of ownership. Insurance reforms can raise or lower premium pressure. Mortgage rules and tax deductions can change the value of buying versus renting.

That means the affordability of a home is not only about the purchase price or the mortgage rate. It is also about the public rules layered on top of that purchase.

How the SALT Cap Changes the Math

Before the TCJA (2018), homeowners could deduct all of their state and local taxes — including property tax — from federal taxable income. The TCJA capped that at $10,000, which hit homeowners in high-tax states hard. The One Big Beautiful Bill Act (OBBBA) raised the cap to $40,400 for 2026 (with 1% annual increases through 2029), then resets it to $10,000 in 2030.

For a homeowner in New Jersey paying $14,000 in property tax and $8,000 in state income tax, the old $10,000 SALT cap meant $12,000 in taxes were non-deductible. Under the new $40,400 cap, the full $22,000 is deductible — saving roughly $4,800 in federal taxes at the 22% bracket.

The Mortgage Interest Deduction

Homeowners can deduct interest on up to $750,000 of mortgage debt ($375,000 for married filing separately). In the early years of a mortgage, when most of the payment goes to interest, this deduction can be substantial. On a $400,000 loan at 6.5%, first-year interest is roughly $26,000.

The catch: you only benefit if your total itemized deductions (mortgage interest + SALT + charitable giving + other) exceed the standard deduction. With the 2026 standard deduction at $16,100 (single) or $32,200 (married filing jointly), many homeowners with smaller mortgages or in low-tax states still come out ahead with the standard deduction.

What This Calculator Does Not Include

This is a cash-flow comparison. It does not include:

PMI costs — private mortgage insurance can be material for lower-down-payment buyers
Equity buildup — each mortgage payment increases your ownership stake
Home appreciation — historically 3–4% annually, though highly variable by market
Opportunity cost of the down payment — that money could be invested in stocks or bonds
Closing costs — typically 2–5% of the purchase price
Transaction costs when selling — agent commissions, transfer taxes, repairs

Equity and appreciation generally favor owning over long time horizons. But for stays under 5–7 years, transaction costs and the interest-heavy early payments can make renting the better deal.

Related Analysis

SALT Deduction Calculator — How much do you save under the new SALT cap?
Lifetime Tax Calculator — How much will you pay in taxes over your lifetime?